Web3 is Going Just Great

While the exploit left the Venus Protocol with over $2 million in bad debt, it's not clear if the attacker even made money from the exploit. The exploiter's position was ultimately liquidated, collapsing the increase in THE price. However, it's possible the exploiter took advantage of the price discrepancy elsewhere to profit.

The Venus Protocol has had a number of issues in the past — notably in June 2023, when the team developing the BNB Chain had to intervene when the a thief borrowed $150 million on Venus against stolen tokens and then faced liquidation.

The Aave founder offered to refund the user the $600,000 in fees collected from the transaction, and acknowledged "there are additional guardrails the industry can build to better protect users".

Chaos Labs, presumably embarrassed to have lived up to its name, promised to reimburse users whose positions were improperly liquidated.

According to Gondi, the exploiter took advantage of functionality that allowed users to sell their NFTs to automatically repay loans.

Gondi has said it has reimbursed customers by buying them "comparable items" from the same collections as their stolen NFTs, although it seems questionable that this will satisfy customers who purchased products whose whole selling point is that they aren't interchangeable.

The blunder was likely due to the authorities' lack of knowledge about cryptocurrency. The move was somewhat akin to authorities publicly posting a username and password for a criminal's bank account — though that would likely be an easier mistake to unwind.

According to Step Finance, "we explored every possible path forward, including financing and acquisition opportunities. Unfortunately, we were unable to secure a viable outcome and have made the difficult decision to end all operations effective immediately."

In reply to Step Finance's announcement, crypto investor Mike Dudas claimed that the project had contacted him about bridge financing, but that Step had never responded to his request for more information about the hack. "i responded: 'would need to see the security post mortem before i could consider investing here' <crickets>"

The attacker was able to manipulate the oracle price to show that USTRY was priced at $100 (rather than its actual trading price of around $1.05). Then, they borrowed against the overvalued asset, withdrawing XLM and USDC priced at $10.2 million. However, around 48 million of the stolen XLM (~$7.2 million) were frozen.

Blockchain security researcher Specter has suggested there may be links between this attack and a $50 million theft from the Infini "stablecoin neobank" a year ago.